In the markets: What to watch this week

It is Spring Festival in the world’s most populated country and the industrial powerhouse of Asian growth.

In the lead-up to the weeklong festival, also known as the Chinese New Year, many raw material prices saw increases as stockpiles were created to deal with most businesses in the country closing down for the celebrations.

Gold surged 8.5% since the December lows, copper rallied 10.4% and iron ore prices hiked 55% from October. But as the celebrations drew near demand for stockpiles declined and so did prices.

The next big surge in demand that investors will be looking out for comes from red envelopes filled with cash, a traditional gift over this festive season. Instead of giving the envelopes in the form of cash, it is expected that many Chinese will transfer their gifts digitally.

Forecasters estimate that 100bn red envelopes will be sent as gifts over this coming week. That’s up from 32bn last year, which was 10 times more than in 2015. Research firm Ovum thinks that the value of these P2P (peer-to-peer) transactions could climb to $270bn in 2019.

Social media platforms operated by tech giants such as Alibaba, Tencent and Baidu have spearheaded the social media payment explosion and many are hopeful that those revenues may trickle down, translating into better earnings for the likes of Naspers*.

Also very important is the Federal Open Market Committee (FOMC) statement and interest rate decision by the Fed on Wednesday. Although a change in the interest rate is very unlikely, as the gathering is not a key meeting which includes a press conference, analysts will scour the statement looking for any changes in language or rhetoric in order to adjust forecasts on the timing of future monetary policy changes.

Economists and monetary policymakers in South Africa are concerned about low growth in SA against the backdrop of the interest rate hiking cycle in the advanced economies.

Lesetja Kganyago, governor of the Reserve Rank, mentioned last week that SA might not be at the end of the tightening cycle. With private sector credit data to be released tomorrow some are concerned about forecasts.

Other important economic announcements this week:

Monday

• EU Business Confidence

Tuesday

• SA M3 Money Supply and Balance of Trade
• Japan Interest Rate Decision
• EU Inflation Rate and GDP Growth Rate Flash
• US Conference Board (CB) Consumer Confidence

Wednesday

• SA Barclays Manufacturing Purchasing Managers’ Index (PMI) and Total New Vehicle Sales
• China Manufacturing PMI
• US ADP Non-Farm Payrolls and ISM Manufacturing

Thursday

• Great Britain Monetary Policy Decision
• US Unemployment claims

Friday

• SA Standard Bank PMI
• China Caixin Manufacturing PMI
• US Non-Farm Employment Change and ISM Non-Manufacturing PMI

*finweek is a publication of Media24, a subsidiary of Naspers.

Giacomo Bonavera is head of foreign exchange trading at Capilis Asset Managers. Click here to visit the firm’s website.